Corn prospects from ethanol production appear strong for 2017

Corn consumption for ethanol production is very likely to surpass the most recent USDA projection of 5.3 billion bushels and the prospect already is impacting the corn market, according to the weekly outlook by Todd Hubbs published in FarmDoc Daily.

Hubbs pointed to the new ethanol production record of 1.043 million barrels per day set the week ending Dec. 30. “The March futures price for corn moved higher last week to close at $3.58 in large part due to strength in the ethanol sector,” he writes. If corn used for ethanol production maintains the pace reported in the Grain Crushing and Co-Product Production report for the past few months, 5.37 billion bushels will be processed in the marketing year.

Reviewing the gasoline consumption forecast by the U.S. EPA, the E10 blend wall will be 14.36 billion gallons in 2017, and E15 and E85 blends are expect to be 107 million and 204 million gallons, respectively. The December U.S. Energy Information Agency outlook projects an increase for gasoline prices in 2017 to $2.30, up from the 2016 average of $2.14, the lowest since 2004.

He also cites ethanol export numbers that through November show 948 million gallons. “For 2016, the prospect of ethanol exports exceeding 1 billion gallons is not unreasonable,” he writes.

“Lower corn prices, strong ethanol exports, and greater blending requirements combine to make 2017 appear to be a strong year for corn consumption in ethanol production,” Hubbs concludes. “If the U.S. ethanol industry produced over 1 million barrels per day for the entire year, the ability to blend at requirement levels under an expanded gasoline consumption scenario and meet potential export market demand bodes well for corn use in the sector for 2017.”